Chapter 6, Problem 1QC

(Learning Objective 1) A graph of a variable cost starts at

1. a. any point on the y-axis and is horizontal.
2. b. any point on the y-axis and slopes upward.
3. c. the origin and slopes upward.
4. d. the origin and is horizontal.

To determine

To identify: The appropriate answer to the given statement.

Answer to Problem 1QC

The graph of a variable cost starts at the origin and slopes upward.

Explanation of Solution

Variable cost is the cost which incurs for every unit of volume produced. Total variable cost change according to the change in volume. Total variable cost is directly proportioned to the changes in volume.

a.

Any point on the y-axis and is horizontal: This option is incorrect because the Fixed cost is the cost that does not change with the change in output level. The graph which starts with any point on the y-axis and is flat or horizontal is the graph which represents the fixed cost.

b.

Any point on the y-axis and slopes upward: This is not the correct option total cost is the cost which comprises of the sum of fixed cost and variable cost. The graph of fixed cost starts with the y-axis and is constant and the graph of variable cost starts with the origin and slopes upward. So, the graph of the total cost starts with any point on the y-axis and the slope of the total cost is downward sloping.

c.

The origin and slopes upward: The option is incorrect as the graph that starts with the origin and slopes upward is the graph of variable cost. Variable cost is the cost that changes with the change in the level of output.

d.

The origin and is horizontal:  This is not the correct option because the graph that starts with the origin and is horizontal shows zero value and lie on the x-axis and it shows the production level or the production line on the graph.